Piramal Enterprises Ltd


BSE: 500302 | NSE: PEL | ISIN: INE140A01024 
Market Cap: [Rs.Cr.] 10,044 | Face Value: [Rs.] 2
Industry: Pharmaceuticals - Indian - Bulk Drugs & Formln

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MANAGEMENT DISCUSSION AND ANALYSIS

FY2013 KEY HIGHLIGHTS:

Acquisition of Decision Resources Group, Inc. (US) and Abacus International (UK)

Piramal Enterprises Limited (PEL) completed acquisition of Decision Resources Group(DRG), a US based provider of high quality, web-enabled research, predictive analytics viaproprietary databases and consulting services to the global healthcare industry, for aconsideration of approximately US$ 635 million (~ Rs 3,400 Crores) in June 2012. With 20%revenue CAGR for the last five years, it is one of the fastest growing companies in theUS$ 5.7 billion global healthcare information industry. It has 48 of the top 50 globalpharmaceutical companies as its customers. The overall customer retention rate is 94%. Thecompany, now a subsidiary of PEL, generated revenues of Rs 649.6 Crores in FY2013. InDecember 2012, DRG acquired Abacus International, a UK based pioneer in evidence-basedglobal market access solutions for many of the world’s leading healthcare companies.

Acquisition of Bayer’s Molecular Imaging Development Portfolio

PEL acquired worldwide rights to the molecular imaging research and developmentportfolio of Bayer Pharma AG through its newly created subsidiary – Piramal ImagingSA in April 2012. The portfolio includes rights to Florbetaben amongst a pipeline of othermolecules. Florbetaben is a PET tracer for the detection of beta-Amyloid plaque depositionin the brain, which is the pathological hallmark of disease in probable Alzheimer’sdisease patients. Phase III trial showed that PET imaging with Florbetaben reliablydetects beta-Amyloid in the brain during life with great accuracy and thus shows value asa potential tool to aid in the diagnosis and assessment of Alzheimer’s disease. Themolecule has been accepted for review by the US Food and Drug Administration (FDA) inMarch 2013 and by the European Medicines Agency (EMA) in January 2013.

Expansion of Financial Services Business

During this year, PEL started lending to the education sector and has explored newgeographies like Bhopal, Coimbatore and NCR. The loan book to Real Estate and EducationSectors has increased to Rs 1,591 Crores as on March 31, 2013 from Rs 351 Crores as onMarch 31, 2012. PEL has also made two structured investments aggregating to Rs 925 Crores.The first investment of Rs 425 Crores was made in March 2013 through OptionallyConvertible Debentures in Navayuga Road Projects Pvt. Ltd. (NRPL), the road subsidiary ofthe Rs 3,000 crore Navayuga Engineering Company (NECL). Another investment of Rs 500Crores was made in April 2013 through Optionally Convertible Debentures in Green InfraLtd., one of the largest clean energy Independent Power Producers (IPPs) in the countryfunded by IDFC Private Equity.

INDIAREIT, which manages funds for investments in real estate sector, has Rs 4,257Crores under management as on March 31, 2013. INDIAREIT raised Rs 400 Crores for MumbaiRedevelopment Fund during FY2013 and is currently raising a new domestic fund withtargeted fund size of Rs 750 Crores along with green shoe option of Rs 250 Crores.

Change of Name to Piramal Enterprises Limited

With effect from July 31, 2012, the name of the company stands changed from‘Piramal Healthcare Limited’ to ‘Piramal Enterprises Limited’. Thechange in the name was done in order to appropriately reflect the changing businessprofile of the Company.

BUSINESS PERFORMANCE

Pharmaceuticals Businesses

Pharma Solutions

The market for Global Outsourcing is expected to grow to US$ 45 Bn by 2015 at acompounded annual growth rate of 12% per year (*Source: Scrip Insights 2012). The globaloutsourcing trend is likely to continue, driven by the rising healthcare costs indeveloped countries and reducing profitability of pharmaceutical companies due to patentexpiry of various blockbuster drugs. Long term prospects for the industry are backed bycost pressures for innovative companies and increasing genericisation. Establishedrelationships and trust with innovators, quality infrastructure, good regulatory trackrecord and low production and R&D costs should place PEL in a good position to takeadvantage of this trend.

In the context of this market outlook, PEL’s revenues from Pharma Solutionsbusiness grew by 14.7% to Rs 1,553.3 Crores in FY2013 as compared with Rs 1,354.5 Croresin FY2012. The revenues from both Indian assets and assets outside India grew by 14.7% toRs 918.5 Crores against Rs 800.8 Crores in FY2012 and to Rs 634.8 Crores against Rs 553.7Crores in FY2012, respectively.

Continued contract flows into overseas facilities:

Increase in demand for existing products was seen during the year. Order booking forthe late phase commercial business increased in FY2013 as compared with FY2012. Long termcommercial contracts were signed at Morpeth in FY2013. Our relationship with PEL’skey partner, Pfizer, at Morpeth, continued to grow. The year saw a strong pipeline ofenquiries, especially for the ADCs business at Grangemouth. In October 2012, PEL enteredinto a strategic alliance with Fujifilm Diosynth Biotechnologies, whereby the two partiesintend to offer seamless contract development and manufacture of ADCs, a growing niche inthe development of biopharmaceuticals.

RegulatoryAudits:

The MHRA Audit at Morpeth and Grangemouth and EU-GMP Audit at the FormulationDevelopment site at Ahmedabad were completed successfully.

Recognition:

The Pithampur facility was awarded the ‘Platinum Award – Pharma Sector,Medium business’ by India Manufacturing Excellence Awards (IMEA) in partnership withFrost and Sullivan while the Digwal facility was awarded the ‘Best AuditPerformance’ award in the category of Occupational Health and Safety Award –2012.

Critical Care

Revenue from Critical Care business was Rs 616.1 Crores as compared with Rs 412.6Crores in FY2012, registering a growth of 49.3%. The high growth rate is on account ofgaining greater share of the Sevoflurane market in the US and some other emerging markets.PEL’s market share in terms of volume for Sevoflurane in US has increased from 25% inMarch 2012 to 30% in March 2013. Major Group Purchasing Organization (GPO) contracts havebeen renewed for next two years in the US. PEL has more than 50% market share in some ofthe emerging markets. There has been a meaningful increase in market share in countriessuch as Turkey and Indonesia. Several tenders were won this year in emerging marketsincluding Mexico, Peru, Kazakhstan and South Africa. Sevoflurane was also launched in theEuropean markets this year. The product will be marketed by direct field force in somecountries while association with marketing partners will continue in most of the othercountries. Isoflurane sales volumes were also higher as compared with last year.

OTC and Ophthalmology

Sales from OTC and Ophthalmology business grew by 23.3% to Rs 271.2 Crores in FY2013 ascompared with Rs 220.0 Crores in FY2012. The OTC sales force and distribution network nowcovers 400,000 retailers in 485 ‘one-lakh+ towns’ in India. New products andbrands were launched through FY2013 – Lacto Calamine Reneu, Lacto Calamine SunScreen, Polycrol+, extensions of Jungle Magic brand of perfumes and Jungle Magic MosquitoBandtiz. ‘Lacto Face wash’ was awarded the ‘Star 2012’ for excellencein packaging by Indian Institute of Packaging.We launched several new OTC products andbrands in FY13, viz. Lacto Calamine Reneu, Lacto Calamine Sun Screen, Polycrol+,extensions of Jungle Magic brand of perfumes and Jungle Magic Mosquito Bandtiz.

Allergan India Limited (AIL) is a 51:49 Joint Venture for Ophthalmic products betweenAllergan Inc., USA and PEL. Total revenues of AIL were Rs 205.4 Crores (FY2012 TotalRevenue: Rs 168.6 Crores). The Operating Profit for FY2013 was Rs 45.6 Crores as comparedwith Rs 40.3 Crores in FY2012. Profit after Tax for FY2013 was Rs 29.2 Crores as comparedwith Rs 25.6 Crores for FY2012.

Life Sciences

PEL is working on discovering and optimizing compounds to meet important unmet medicalneeds in the target markets of cancer, diabetes and inflammation. Spend on R&Dexpenses for FY2013 was Rs 286.7 Crores vis--vis Rs 233.1 Crores in FY2012.

NCE Research:

The broad highlights of progress made in key therapy areas are given below:

Oncology:

During the year, the Oncology portfolio has made progress with the completion of twoclinical trials for P276-00 for Head and Neck Cancer: a Phase II trial with P276-00 as asingle agent and Phase I/II in combination with radiation. Also, the Phase

II clinical trial of P276-00 in combination with Cisplatin and radiation for RadiationInduced Mucositis has completed patient recruitment. The development of P276 for MantleCell Lymphoma, Malignant Melanoma and Triple Negative Breast Cancer was discontinued asthe results of clinical trials were not encouraging.

Phase I trials for P1446A in India and Canada have been completed. During the year,Investigational New Drug (IND) application was approved for P1446A for Malignant Melanoma.Phase I extension clinical trial has been initiated in the US. IND approval was alsoreceived for P7170 and PL225B. PEL has partnered with Merck for PL225B. The Phase I trialsof P7170 and PL225B have commenced and patient recruitment is in progress, both in the USand India.

Diabetes:

Phase II clinical trials for P1736-05 and Phase I clinical trials for P7435 in Indiahave been completed. During the year, IND was filed with the USFDA for a new candidateP11187, a GPR40 agonist for Type II diabetes. The development of P1201 for which there wasa partnership agreement with Eli Lilly was discontinued due to safety issues in themolecule.

Imaging:

The worldwide rights to molecular imaging research and development portfolio of BayerPharma were acquired this year. Since then, the transition from Bayer has been completedand processes and systems have been set up. During the year, an agreement was entered intowith IBA Molecular, a world leader in Nuclear Medicine for manufacturing and distributionof Florbetaben in the European and US markets. The New Drug Application (NDA) have alsobeen filed for Florbetaben with USFDA in December 2012 and with EMEA in January 2013 andthese have been accepted for review by both in March 2013. Efforts are now focused onbuilding an organization during the year that can start commercial operations postrequisite regulatory approvals.

Bio-orthopedics:

During the year, the European CE mark approval for BST-CarGel was received.BST-CarGel, an EU class III medical device, is a novel natural polysaccharide basedliquid scaffold which, combined with the patient’s whole blood, is then implantedinto a debrided cartilage lesion prepared with bone marrow access. Enabled by the Europeanregulatory approval, PEL has commercially launched BST-CarGel in December 2012 in all ofthe major countries in Europe. Filing for reimbursement with the insurance companies havealso commenced in these countries. PEL is also planning to file the dossier for regulatoryapproval to market BST – CarGel in India.

Financial Services Businesses

The Financial Services segment of PEL consists of the NBFC operations and a real estatefund management business. Income from Financial Services businesses including investmentincome grew by 44.2% to Rs 393.2 Crores this year as against Rs 272.8 Crores forFY2012.

NBFC Operations :

During the year, PEL expanded its NBFC operations and started lending to the educationsector along with the Real Estate Sector. The lending operations are currently focused inMumbai, Pune, Bengaluru, Chennai, Bhopal, Coimbatore and NCR. A highly experienced andknowledgeable team, well defined systems and processes and robust credit approval andmonitoring policies are in place. As of March 31, 2013, the total loan book for realestate and education sector stood at Rs 1,591 Crores as compared with Rs 351 Crores as onMarch 31, 2012. PEL also invested Rs 425 Crores in Optionally Convertible Debentures ofNavayuga Road Projects Pvt. Ltd. (NRPL) in March 2013. Similarly, another investment of Rs500 Crores was made in Optionally Convertible Debentures of Green Infra Ltd in April 2013.PEL is exploring opportunities either in yield assets (e.g. toll roads) or as mezzaninefinancing for a portfolio of cash generating and under execution projects.

INDIAREIT:

As on March 31, 2013, INDIAREIT has Rs 4,257 Crores under management. INDIAREIT raisedRs 400 Crores for Mumbai Redevelopment Fund during FY2013 and is in the process of makingexits worth Rs 440 Crores across earlier funds in Q3FY2013.

Rs 200 Crores were committed across two transactions in Q4FY2013 - Rs 100 Crores eachon behalf of Domestic Scheme IV and as the first investment from the recently closedMumbai Redevelopment Fund. Rs 400 Crores were raised for Mumbai Redevelopment Fund duringFY2013. A new domestic fund, with a targeted fund size of Rs 750 Crores with green shoeoption of Rs 250 Crores, is currently being raised.

Information Management Business

The Information Management business of PEL was established through the acquisition ofthe US based company, Decision Resources Group (DRG). The acquisition was completed inJune 2012 for a consideration of US$ 635 million (~ Rs 3,400 Crores). DRG is the goldstandard provider of syndicated research, information and analytics to the globalhealthcare industry with a strong management team. DRG, now a subsidiary of PEL, hasapproximately 200 analysts, including 100+ highly experienced PhDs, MDs, MPHs and otherindustry experts. DRG continued to achieve a high customer retention rate of over 94% andretained all of its top 20 customers.

Abacus International was acquired in December, 2012 to help grow the business inEurope. Abacus International is a UK based pioneer in evidence-based global market accesssolutions for many of the world’s leading healthcare companies.

NET SALES ANALYSIS (CONSOLIDATED):

Total Income grew by 50.7% to Rs 3,544.3 Crores in FY2013 as against Rs 2,352.3 Croresin FY2012 with growth coming from across each business line. PEL’s Pharma Solutionsbusiness grew by 14.7% to Rs 1,553.3 Crores against Rs 1,354.5 Crores for FY2012. Revenuefrom Critical Care grew by 49.3% to Rs 616.1 Crores as compared with Rs 412.6 Crores inFY2012. Sales from OTC and Ophthalmology segment were Rs 271.2 Crores as compared with Rs220.0 Crores in FY2012 registering growth of 23.3% for the year. Income from FinancialServices business including investment income grew at 44.2% to Rs 393.2 Crores this yearas against Rs 272.8 Crores for FY2012. Revenue from the Information Management businesswas Rs 649.6 Crores this year. The break-up of aggregate Total Operating Income is asunder:

Rs In Crores
Total Operating Income Break-up % Sales

Year ended

% Growth
March 31, 2013 March 31, 2012
1 Pharmaceutical Businesses
a Pharma Solutions 43.8 1553.3 1,354.5 14.7
From assets in India 25.9 918.5 800.8 14.7
From assets outside India 17.9 634.8 553.7 14.7
b Critical Care 17.4 616.1 412.6 49.3
c OTC and Ophthalmology 7.7 271.2 220.0 23.3
2 Financial Services businesses (Incl. Investment Income) 11.1 393.2 272.8 44.2
3 Information Management 18.3 649.6 - -
4 Others 1.7 60.9 92.6 - 34.2
Total 100 3544.3 2,352.3

Income Statement

Rs In Crores
Particulars FY2013 FY2012 Growth %
Total Operating Income 3,544.3 2,352.3 50.7
EBITDA 611.0 471.3 29.6
EBITDA as a % of Total Operating Income 17.2% 20.0% -
Interest Expense 575.0 215.5 166.9
Depreciation 209.6 129.3 62.1
Exceptional Items 19.1 5.7 237.8
Profit Before Tax (192.7) 120.9 -
Tax 24.8 5.6 339.8
Profit After Minority Interest and Share in Profit / Loss of Associates (227.3) 111.5 -
Earnings Per Share (Rs) (Face value Rs 2/-) (13.2) 6.6 -
Earnings Per Share before exceptional items (net of tax) (Rs) (12.1) 6.9 -

Total Operating Income

Total Operating Income grew by 50.7% to Rs 3,544.3 Crores as compared with Rs 2,352.3Crores in FY2012. This is mainly due to the increase in sales in Critical Care business,income from the newly created, information management segment, the increase in income fromthe financial services segment and growth in other healthcare businesses. A detailedanalysis of Total Operating income is given earlier in the report.

Earnings before Interest, Depreciation and Tax (EBITDA)

EBITDA for the year grew by 29.6% to Rs 611.0 Crores as against Rs 471.3 Crores inFY2012. The margins as a percentage of total income were lower at 17.2% as compared with20.0% for FY2012. EBITDA for FY2013 was higher mainly due to higher revenues.

Interest Expense

The interest expense for the year is higher by 166.9% at `575 Crores as compared with`215.5 Crores in FY2012 on account of loans taken to fund the acquisition of DRG and tofund the NBFC operations. The interest expenses also include the discount on Rs 975 Croresof Abbott receivables that were monetized in March 2013.

Depreciation

Depreciation for FY2013 was up by 62.1% at Rs 209.6 Crores as compared with Rs 129.3Crores in FY2012 mainly because of increase in fixed assets due to acquisition of DRG.

Taxation

Increase in tax expenses are on account of taxes paid on income from financialservices.

Profit / Loss after Minority Interest and Share in Profit / Loss of Associates andEarning Per Share (EPS)

Loss after Minority Interest and share in profit / loss of associates for the year wasRs 227.3 Crores and EPS for the year was at Rs (13.2) per share.

Balance Sheet

Rs in Crores
Particulars As at March 31, 2013 As at March 31, 2012
Liabilities
Share Capital 34.5 34.5
Reserves and Surplus 10,689.1 11,207.5
Minority Interest 14.9 10.3
Loan Funds 7,688.1 2,046.7
Deferred Tax Liability / (Asset) (46.0) 50.2
Total Liabilities 18,380.6 13,349.2
Assets
Net Fixed Assets 6,081.4 2,088.6
Investments 7,876.8 6,964.1
Net Working Capital 4,422.4 4,296.6
Total Assets 18,380.6 13,349.2

Loan Funds

Total Debt as on March 31, 2013 was Rs 7,688.1 Crores, compared to Rs 2,046.7 Crores ason March 31, 2012. Debt/ Equity ratio was 0.72 as on March 31, 2013, compared to 0.18 ason March 31, 2012. Debt increased during the year mainly on account of loans taken to fundthe acquisition of DRG and to fund NBFC operations.

Fixed Assets

During the year, PEL’s gross fixed assets increased by Rs 4,407.7 Crores. Themajor items of capital expenditure are as under:

Rs in Crores
Details FY2013
1. Goodwill on acquisition of Decision Resources Group (DRG) 3,871.80
2. Goodwill on acquisition of Sigmatic Limited (Abacus International, UK) 153.32
3. Intangible assets (Tradenames and non compete fees) acquired on DRG acquisition 92.78
4. Increase in assets of Pharma Solutions 82.80
5. Increase in assets of Critical Care 65.62
Total 4266.3

Investments:

Book Value of Investments as on March 31, 2013 was higher at Rs 7,876.8 Crores,compared to Rs 6,964.1 Crores as on March 31, 2012. The increase was mainly due toinvestment in non convertible debentures and liquid funds.

Net Working Capital (Consolidated)

Rs in Crores
Particulars As at March 31, 2013 As at March 31, 2012
Raw / Packing Material 182.31 208.51
No. of days 26 37
Finished Goods 188.59 95.8
No. of days 27 17
Receivables 595.6 436.7
No. of days 67 78
Net Working Capital 486.2 363.6
No. of days 55 65

Net Working Capital as on March 31, 2013 is higher as compared with that on March 31,2012 due to increase in cash and Trade Receivables which are attributable to DRG.

Notes:

1. Sales for this purpose is Gross Sales (i.e. net sales + excise duty) and itincludes other operating income but does not include income from financial services.Revenue from information management business is included for the purpose of calculatingdays in receivables but not in case of inventory.

2. Receivables do not include the outstanding amount receivable from Abbottpursuant to sale of domestic formulation business and receivables pertaining to financialservices.

3. Other current liabilities do not include current maturities of long term debtand unamortised deferred premium.

HUMAN RESOURCES (HR)

Over the past year, the focus for HR function has been to be better aligned withbusinesses as well as instill PEL’s core values of ‘Knowledge, Action andCare’ in every initiative that HR undertakes. The company has invested in developingthe HR function to support the long term growth through multiple initiatives as under:

Recruitment Process:

In the current year, the Turnaround Time (TAT) for recruitment reduced by 33%, in part,through use of nontraditional / innovative sources, which formed ~76% of the totalrecruitments.

Induction Process:

PEL’s induction process now involves greater emphasis on understanding of the corevalues. The primary objective of this initiative is to ensure that employees assimilateinto the culture of the organization faster and are fully equipped to approach their rolesbetter. The attempt of the team has been to bring in standardization and timeliness toensure a similar experience of joining for all new employees across the group.

Learning and Development:

PEL’s values of ‘Knowledge, Action and Care’ include the need for itsemployees to constantly build expertise and domain knowledge, thereby, creating value forthemselves and for the company. To enable this company, has created structured learningopportunities through the ‘Learning University’ and ‘Learning Friday’series.

The ‘Learning University Calendar of Programs’ was a result of collated needsfrom PEL’s various businesses. Over 1,300 employees were covered through 72 differentprograms under the Learning University. Stakeholders and participants found these programsto be highly relevant and impactful.

The ‘Learning Friday’ series brought in several speakers on subjects rangingfrom personal finance planning to health and wellbeing. About 1,000 employees were coveredunder this series through 42 different programs offered across locations. The Learning andDevelopment team also introduced the opportunity for employees to pursue GeneralManagement E- MBA in partnership with the S. P. Jain Institute of Management, Mumbai.

Performance Management System

In line with the value of ‘Action’, the focus in the area of‘Performance Management’ was to bring in standardization, process clarity andexecution excellence. Execution excellence became the mandate and was achieved throughworkshops across the businesses focusing on the need for coaching and mentoring.

Bandhan

Globally, employee engagement as a metric of business success is getting more attentionthan ever before. Employee engagement and business performance feed into each other andhelp organizations, teams and individuals perform better. We have conducted an employeeengagement initiative called ‘Bandhan’, over the last five years – aimed atenriching the working environment and building a strong culture of engagement. As anextension of the value of ‘Care’, PEL also focused on sustained engagementthrough action planning workshops conducted across PEL’s businesses.

Career Opportunity Program

The Career Opportunity Program has been conceptualized to provide a platform that givesemployees opportunities to benefit from cross functional, inter and intra-location /business movements across PEL. Job rotation and enrichment continues to be one of theareas of focus to enhance the skills of the employees. The focus in FY2013 was providingopportunities to employees on multi-tasking / skilling which has resulted in jobenrichment.

During the period under review, total manpower of PEL on a consolidated basis increasedby 419 people to 4,347 from 3,928 in FY2012, details of which are as under:

Function As at March 31, 2013 As at March 31, 2012 Change
Field 537 517 20
R&D 827 750 77
Others 2,428 2,623 (195)
Pharmaceuticals Total 3,792 3,890 (98)
Financial Services 40 38 2
Information Management 515 - -
Grand Total 4,347 3,928 419

RISKS

Piramal Enterprises Limited (PEL) has emerged as a global conglomerate with operationsin India, UK, USA, Canada, Germany, Italy, etc. With increasing global operations anddiversified businesses, PEL’s risk management process has undergone a significantchange. Risk management is a systematic process of identifying, analysing and respondingto risk events that have the potential to generate adverse effect on the achievement oforganizational objectives. Risks are classified into various categories for bettermanagement and control. Each risk category is assigned an owner and appropriately definedfor the purpose of common understanding. Also, the possibility of occurrence of the riskevent (likelihood) and the magnitude of their consequences (impact) on the organization isdetermined and used to prioritise risk management. Detailed mitigation plans are workedout and effectiveness of the same is assessed periodically.

PEL undertook a project to assess the issues related to governance, risk andcompliance. This enabled the Company to put in place adequate systems and processes foridentification, reporting and mitigation of risks, and for ensuring compliance. Followingare the major risks perceived by PEL:

Life Sciences:

There are significant investments made for specializing in discovery and development ofnovel small molecule drugs to meet important unmet medical needs in the target markets.PEL is exposed to risks arising out of the extremely challenging probability of successrate of drug discovery and commercialisation.

Client Concentration Risk in Pharma Solutions Business:

PEL’s business model is based on contracts with customers. Significant business istransacted with a few major customers. As a result, any set back at customers’ endmay adversely affect revenues.

Product and Quality Risk:

PEL is expected to maintain global quality standards in manufacturing. Some ofPEL’s products are directly consumed / applied by the consumers. Any deviation withregards to quality compliance of these products would impact the consumers worldwide andhence, adversely affect the Company’s performance.

Default and Concentration Risk in Financial Services Business:

As an NBFC, the risk of default and non-payment by borrowers may adversely affectprofitability and asset quality. Also, concentration in the real estate sector poses arisk to PEL.

Adverse Fluctuations in Foreign Exchange Risk:

PEL has significant revenues in foreign currencies through export of products andoperations outside India. PEL is exposed to risk arising out of changes in foreignexchange rates.

Interest Rate Risk:

Volatility in interest rates in lending and treasury operations could cause the netinterest income to decline and adversely affect profitability of the financial servicesbusiness.

Regulatory Risk:

PEL requires certain statutory and regulatory approvals for conducting businesses andfailure to obtain, retain or renew them in a timely manner, may adversely affectoperations. A change in laws or regulations made by the government or a regulatory bodycan increase the costs of operating a business, reduce the attractiveness of investmentand / or change the competitive landscape. Also, PEL is structured through varioussubsidiaries in various countries in a tax efficient manner. Changes in regulations interms of repatriation and funding may lead to adverse financial impacts.

Investment Risk:

PEL has equity investment in companies in India. Like any other equity investment, thisis subject to market conditions.

Disclaimer:

Certain statements included above may be forward looking and would involve a number ofrisks, uncertainties and other factors that could cause actual results to differmaterially from those suggested by the forward looking statements.

BEYOND THE BOTTOM LINE

Piramal Enterprises Limited (PEL) has, over the last five years, set up specificinitiatives to address deep rooted issues in the domains of public education, primaryhealthcare, clean drinking water and women’s empowerment. These initiatives, operatedand managed by Piramal Foundation, have adopted innovative approaches and cutting edgetechnology in tackling specific problems in each of the areas outlined earlier. PiramalFoundation actively partners with governments, public agencies and other foundations inimplementing these solutions across wider geographies in India. Piramal Foundationbelieves that any solution that is implemented should offer long term and sustainableremedy to the problem on hand.

Piramal Foundation has undertaken the following initiatives:

Piramal Swasthya

The healthcare initiative is implemented through Health Management and ResearchInstitute (HMRI) in partnership with State Governments and foundations. HMRI is anon-profit organization that works towards improving access and quality of healthcareservices for all, especially the underserved rural populace. It is operational in Assam,Andhra Pradesh, Karnataka, Rajasthan and Maharashtra. HMRI recently launched itsoperations in Karnataka – "Arogya Vani’ – under a State Governmentinitiative, besides being invited to offer tele-medicine solutions in the Thane tribaldistrict in Maharashtra.

HMRI runs the following services :

Health Information Helpline (HIHL): HIHL is HMRI’s solution toIndian citizens’ health information access problem. HIHL provides medically validatedadvice, counseling services, directory information and a platform wherein callers canlodge service complaints against public health service providers. HMRI runs four HIHLs,104 ‘Sarathi’ in Guwahati, Assam, 104 ‘Advice’ in Jaipur, Rajasthan,104 ‘Advice’ in Pune, Maharashtra and 104 ‘Arogya Vani’ in Karnataka.The counseling services, algorithms and disease summaries – the technologicalbackbones of 104 ‘Advice’ are constantly being updated.

Mobile Health Services: HMRI’s Mobile Health Services addressesphysical access problems by providing primary care, especially maternal and child healthand chronic disease services, to villagers living beyond three kilometers of the nearestpublic health facility. Currently, HMRI operates over 100 mobile vans across Assam, Orissaand Rajasthan.

Telemedicine: HMRI’s telemedicine services solve the issue ofspecialist access for Indians residing in remote areas by using specialized digitalmedical technology, HMRI telemedicine software and videoconferencing services. Thisservice provides point-of-care, user friendly, cost effective, integrated multi-functionaldevice for rural telemedicine applications with an emphasis on general physicianfunctionality and is currently operational in Araku in Andhra Pradesh.

HMRI’s advice through helplines has benefited over 50 million callers to date andaverted more than 900 suicides and nearly 15 million out-patient visits.

In addition, HMRI implements the ‘Piramal eSwasthya’ model in Rajasthan. Themodel was created to explore ways to improve access to healthcare for rural population. AtPiramal eSwasthya, local literate women (Piramal Swasthya Sahayikas- PSS) are recruited,trained and are given a medical kit, marketing material and a mobile phone. After talkingto and examining the patient, the PSS would communicate this diagnostic data through acell-phone to a centralized call centre. At the back end, a paramedic would enter theinformation provided into a simple e-diagnosis system which would generate an automatedresponse with the recommended prescription validated by a doctor stationed at the callcenter. This model is currently operational in 96 villages in Jhunjunu, Churu and Nagaurdistricts of Rajasthan. Till date, 65,000 patients have been treated successfully.

Sarvajal

In India, about 40 million people suffer from water borne diseases each year. Toimprove availability of safe and pure drinking water, Sarvajal has introduced a uniqueconcept that works in a decentralized model and uses technology in ensuring continuity ofservice through the year.

Sarvajal is making safe drinking water accessible to rural population at extremelyaffordable prices. Sarvajal water, filtered through 5 stages including RO and UV, isprovided in accordance with IS 10500, the drinking water quality standard. Sarvajal workswith franchisees in the rural areas and will soon be offering its services in underservedurban communities. The Sarvajal delivery model has now been enhanced through theintroduction of a Water ATM. The filtration plant and ATMs create a ‘hub andspoke’ model of delivery and ensures availability of water 24x7 in the immediateneighbourhood. The Sarvajal service is currently availed by about 100,000 people everyday.

Piramal Foundation for Education Leadership (PFEL)

PFEL has, over the last year, doubled its Principal Leadership Development Programme bycovering more than 780 schools across four districts in Rajasthan, viz. Jhunjhunu, Churu,Udaipur and Dungarpur. PFEL offers in-service and pre-service leadership training programsfor school heads and education administrators of the government system. PFEL partners withschool heads (head teachers, head masters or principals) to turn around their failingschools through a 3 year part time in-service program with a combination of workshops andon-site coaching. Education leaders (at cluster, block, district and state levels) aretrained to substantially improve the educational outcomes in their geography.

Simultaneously, PFEL also runs an intense 24-month youth leadership development programthat helps talented young people to develop the skills to cause positive, exponential andlasting change in society. The ‘Piramal Fellows’ during the two years, work as‘Sahyogis’ to five school principals each. They bring their problem solvingskills, positivity, creativity to grassroot issues such as teacher motivation, community– school relationships and the school leader’s own sense of identity andpurpose. Over 250 Piramal Fellows are currently engaged in bringing about change in thegovernment school system in partnership with the school heads.

PFEL has now embarked on construction of a School of Leadership at Bagar which would bea world class training facility to offer accredited, recognized programmes for higherstudies in Leadership. PFEL is attempting to bring the Education Leadership discourse inthe mainstream by collaborating with key thought leaders in this field. The School ofLeadership will be functional by November 2013.

Source for Change (SFC)

SFC has been an attempt of Piramal Foundation to offer empowering opportunities forwomen in rural India through creation of livelihood programmes. SFC currently runs aBusiness Process Outsourcing unit located in Bagar, Rajasthan that provides top-qualityBPO services to global clients at competitive prices. SFC aims to create opportunities forthese women to learn, grow, achieve financial and social freedom and earn renewed respectfrom the community. SFC has now evolved into a full-fledged state-of-the-art BPO with aresource capacity of 270 seats. The centre also has a comprehensive and rigorous trainingprogram wherein all associates undergo two modules of training – core training incomputer skills and soft skills training that includes team building, confidence-building,leadership and communication workshops. Till date, more than 400 women have benefittedfrom SFC.

Pratham

Pratham was established in 1994 to provide pre-school education to the children in theslums of Mumbai city. The organization is founded on the firm belief that education is afundamental right of every child and no child should be deprived of this basic rightsimply because he/she does not have access to it or does not have the resources to realizehis/her dreams. Pratham’s programs are designed to ensure that enrollment in schoolsincrease, learning in schools and communities increase, the education net reaches childrenwho are unable to attend school and models are replicated and scaled up to serve largenumbers of children to achieve a wide scale impact. Mr. Ajay G. Piramal, Chairman ofPiramal Enterprises Limited, is the current Chairman of Pratham.

Gopikrishna Piramal Memorial Hospital (GPMH)

GPMH was established in 1983 in Mumbai. Since inception, the focus of the hospital wasto address the major issues of delivery of child health care and welfare to theunderprivileged segment of the society. Free medical services are offered on out-patientbasis like Extended Immunisation Programme for children, Medical Checkup Camps, PaediatricConsultation, Camps for Detection of Diabetes and Hypertension in economically andsocially backward areas along with free medicines, Directly Observed Treatment (DOT)Programme in collaboration with Brihanmumbai Municipal Corporation (BMC), DirectorateGeneral of Health Services (DGHS) and World Health Organisation (WHO). The hospital alsoprovides Nephrology Consultation and Haemodialysis Therapy Service for patients with EndStage Renal Disease at nominal charges. This was the first general hospital to have beenawarded the ISO 9000 Certification. The first ever university affiliated Course inDialysis Technology in Western India was started in 2004 by GPMH in affiliation with SNDTWomen’s University in Dialysis Technology.

Annamrita

To fight the problems of hunger and illiteracy, the Government of India launched theMidday Meal Scheme in 1994. The Mid Day Meal initiative was taken up by ISKCON Food ReliefFoundation (IFRF) in 2005. Piramal Foundation pledges to feed 50,000 children dailythrough ‘Annamrita’, a venture along with IFRF. Piramal Foundation also hassupported the set up of 2 central kitchens for Annamrita.

   

Peer Comparison

Company Market Cap
(Rs. in Cr.)
P/E (TTM)
(x)
P/BV (TTM)
(x)
EV/EBIDTA
(x)
ROE
(%)
ROCE
(%)
D/E
(x)
Sun Pharma.Inds. 129,677.83 0.00 16.65 112.59 6.6 8.3 0.01
Dr Reddy's Labs 43,638.30 23.72 5.61 14.62 17.5 20.0 0.25
Cipla 32,087.90 23.26 3.62 13.35 18.4 23.4 0.06
Ranbaxy Labs. 19,961.25 0.00 138.12 72.87 0.0 0.0 2.38
Cadila Health. 19,924.27 27.35 6.84 22.22 18.2 14.8 0.56
Aurobindo Pharma 16,163.68 17.86 5.50 7.02 18.3 14.8 1.03
Glenmark Pharma. 15,466.54 42.12 6.13 28.85 16.4 14.3 0.23
Ipca Labs. 10,321.27 24.82 6.57 12.28 23.4 24.9 0.40
Piramal Enterp. 10,044.14 0.00 0.95 60.64 -2.1 1.2 0.28
Torrent Pharma. 9,461.09 13.68 5.73 8.14 37.0 32.1 0.43
Biocon 9,338.00 32.56 4.23 12.28 12.8 14.6 0.07
Wockhardt 7,244.65 22.02 8.85 23.16 63.8 31.3 0.66
Alembic Pharma 5,721.92 25.90 12.45 8.35 38.4 31.8 0.66
Mylan Lab. 3,273.19 5.13 1.32 0.00 29.4 30.0 0.69
Strides Arcolab 2,775.96 2.56 0.56 46.94 7.3 8.9 0.56

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Key Information

Key Executives:

Ajay G Piramal , Chairman  

Keki Dadiseth , Director  

Swati A Piramal , Vice Chairperson  

Nandini Piramal , Executive Director  


Company Head Office / Quarters:
Piramal Tower,
Ganpatrao Kadam Mg Lower Parel,
Mumbai,
Maharashtra-400013
Phone : 91-22-30466666
Fax : 91-22-24902363
E-mail : complianceofficer.phl@piramal.com
Web : http://www.piramalhealthcare.com
Registrars:

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